Case Law Details
ACIT Vs. Head Infotech India Pvt. Ltd. (ITAT Hyderabad)
Assessee hosts online games and when the customers make payments through banking Gateways by way of credit or debit card of the relevant banks ( which are referred to as Gateways) and while transferring money to the assessee’s account, banks invariably retain service charges. It is submitted that service charges collected by the Banks/Gateways cannot be considered as commission paid by the assessee and, therefore, provisions of section 194H are not applicable. He submitted that the CIT(A), in assessee’s own case for AY 2013-14 and 2014-15, had considered the issue at length and had held that provisions of section 194H are not applicable and the decision in the said years has been followed by him in the AY under consideration. He submitted that the CIT(A) has also recorded that the Gateways have offered the payment retained by them in their respective returns of income and, therefore, no disallowance u/s 40(a)(ia) is to be made.
Having regard to the rival submissions and after perusing the material on record, we find that the CIT(A) has followed the decisions of the coordinate benches of this Tribunal wherein it has been held that the “sale made on the basis of a credit card” is the transaction of the merchant establishment and that the credit company only facilitates the electronic payment for a certain charge and the commission retained by the credit card company is therefore in the nature of normal banking charges and not in the nature of commission/brokerage for acting on behalf of the merchant establishment. The ld. DR has not been able to rebut the decisions of the Tribunal with any decision of the appellate forums to the contrary. Therefore, we do not find any reason to interfere with the order of CIT(A) in deleting the disallowance made by the AO u/s 40(a)(ia) of the Act. Thus, upholding the same, we dismiss the grounds raised by the revenue on this issue. Further, it is also noticed that the Gateways have offered the income to tax in their hands in their respective returns of income. Therefore, the proviso to section 40(a)(ia) is applicable and for this reason also, the disallowance cannot be sustained.
FULL TEXT OF THE ITAT JUDGEMENT
This is Revenue’s appeal for the AY2015-16 against the order of the Commissioner of Income Tax (Appeals) – 2, Hyderabad, dated 14-11-2018. The grounds raised by the revenue are as under:
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Is there any TDS applicability on the TDR charges charged by Payment gateway company